Is the Stock Market Going to Correct or Crash?

In the last couple of days the US stock market has fallen by several percent, having its worst days since early in the year. Is the stock market going to correct or crash? Technical analysis shows that stocks have fallen through several support levels. Fundamentals are troubling with the trade war a major issue, followed by huge levels of debt in the USA and across the globe. Money Morning writes that this could be the beginning of a 2018 stock market crash.

One investing expert predicts 2018 will be the year of the greatest economic crisis of the century.Jobs will suffer, the housing market will spiral downward, and millions of American seniors will face bankruptcy.The average stock traded on Wall Street is poised to plunge by at least half during the coming 2018 stock market crash.

All of this comes on the heels of the Fed raising interest rates by a quarter of a percent! There is no question that many investors are fully aware that the market has had a long bull run and that there are lots of issues that could drag stocks down. However, the stocks that have been driving market growth have done so based on persistently higher earnings. Unemployment is at historic low levels. And, the smaller trade wars with everyone except China are getting settled slowly but surely.

Moody’s is predicting that US growth will slow to 2.3% next year and China’s to 6.4%. Why is this happening and why is there a danger of a prolonged trade war and diminution of the global economy?

The trade war with China is not just about balance of trade, currency manipulation, and tariffs. The trade war with China is part of a struggle for global dominance.

Many in the USA long for the “good old days” of American dominance. Those days occurred because WWII destroyed so much of the global economy and left the US economy intact. Nevertheless, many Americans are really angry and thus elected Donald Trump. Trump is under pressure to “get a better deal” for his constituents and is not known for backing off. And, even when Trump is no longer in office, US leaders will need to address the trade imbalance with China in order to preserve a strong US economy, manufacturing base, and defense.

A recent Bloomberg article described how Chinese military intelligence put tiny chips in US-bound computer boards to spy on major US tech firms. If you look at Washington wanting to force US industry to move manufacturing out of China for defense reasons you will not be far off.

China does not want to go back to its period of isolation and has global ambitions as seen in its Silk Road project to create rail and sea links to markets across Eurasia. China needs to sell it products to the world in order to further its global ambitions. There will be a level of tariffs and loss of markets that China will not be able to agree to in their leadership wants to maintain control of the country. Meanwhile wealth Chinese are causing a flight of capitalfrom the new Middle Kingdom.

China is in a pickle. Their debt load is skyrocketing. The populace in China tolerates the Communist Party because of the current period of prosperity. If China’s grow levels off or declines money will flow out of the country and social unrest will ensue. The Chinese leadership aims for global dominance on a par with or above that the USA. The USA is not likely to give up all that easily. If the “permanent trade war” is not handled well in China, more so than in the USA, a market crash would be more likely than a market correction.

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